Equity Indexed Life Insurance: What You Need to Know

Shawn Plummer

CEO, The Annuity Expert

What is Equity Indexed Life Insurance?

Equity Indexed Life Insurance is a type of permanent life insurance policy that combines the death benefit protection of traditional life insurance with a cash value component that is linked to a stock market index, such as the S&P 500. These policies are designed to provide policyholders with the potential for cash value growth based on the performance of the equity index, while also offering a degree of protection against market downturns.

Equity Indexed Life Insurance

Key Features

  • Linked to Equity Index: The cash value’s growth is tied to the performance of a specific equity index, but it does not invest directly in the stock market.
  • Guaranteed Minimum Interest Rate: Offers a guaranteed minimum interest rate, ensuring that the policy’s cash value does not decrease even if the linked index performs poorly.
  • Participation Rate: The degree to which the cash value benefits from gains in the index is determined by the participation rate, which is set by the insurer.
  • Cap Rate: There may be a maximum cap rate, which limits the maximum credit to the cash value, regardless of how well the index performs.


When considering an Equity Indexed Life Insurance policy, it’s important to thoroughly understand how the policy works, including how the cash value is credited and the impact of fees and charges. It’s also vital to consider your long-term financial goals, risk tolerance, and the role that the policy plays within your overall financial plan.


Equity Indexed Life Insurance offers a unique blend of death benefit protection and the potential for cash value growth linked to the performance of the equity markets, with built-in protections against market losses. However, its complexity, costs, and potential limitations mean it’s not suitable for everyone. Evaluating your financial objectives and consulting with a financial professional can help determine if this type of policy fits into your financial strategy.

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Shawn Plummer

CEO, The Annuity Expert

Shawn Plummer is a licensed financial professional, insurance agent, and annuity broker with over 14 years of first-hand experience with annuities and insurance. Since beginning his journey in 2009, he has been pivotal in selling and educating about annuities and insurance products. Still, he has also played an instrumental role in training financial advisors for a prestigious Fortune Global 500 insurance company, Allianz. His insights and expertise have made him a sought-after voice in the industry, leading to features in renowned publications such as Time Magazine, Bloomberg, Entrepreneur, Yahoo! Finance, MSN, SmartAsset, The Simple Dollar, U.S. News and World Report, Women’s Health Magazine, and many more. Shawn’s driving ambition? To simplify retirement planning, he ensures his clients understand their choices and secure the best insurance coverage at unbeatable rates.

The Annuity Expert is an independent online insurance agency servicing consumers across the United States. The goal is to help you take the guesswork out of retirement planning and find the best insurance coverage at the cheapest rates

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